Monday, December 20, 2004

Mike's Company

My friend Mike owned a software company that had a nice little niche market under its belt. At his peak, he had six employees, of which I was one. I worked for Mike as his marketing director for about seven months until Microsoft called me from the minors to the big leagues. Our parting was amicable, and we stayed in touch over the years. Mike probably earned about $125,000 a year at the company's peak. Not a tremendous amount, but a very good living in my part of the world. And there was the promise of greater riches as his company grew and thrived. He would often be invited to speak at industry trade shows and he enjoyed the attention and importance that his company bestowed on him.

Mike invited me to lunch recently. The small talk inevitably lead to business, and I learned that he is being forced into bankruptcy. A confluence of bad luck and bad business moves helped sink his ship.

A new competitor entered his niche market, seeing it as a growth opportunity. The competitor is profitable in another market and was parlaying that advantage to "grab market share" through aggressive pricing in Mike's market. Compounding Mike's problems were difficulties finding reliable employees. Being understaffed caused sales and service to suffer. Mike was the primary software developer for his company, but he was too often pulled away from development to solve problems in other areas.

Mike kept drawing down his line of credit at the bank. This kept the company going for about two years. But now, revenues are about half of what they were two years ago while his loan payment has increased. Now the credit is gone, forcing him to lay off employees that he can no longer afford. As employees are layed off, customers become even more dissatisified. Throw in some deadbeat clients that defaulted on large obligations (and which Mike had used to help collateralize his loan) and the slow downward death spiral his company had been on was now spinning out of control.

Mike didn't mean for this to happen. Not many people set out intentionally to land in bankruptcy. His eternal optimism that things were going to get better, that a big contract was right around the corner, kept him working those 16 hour days, forgoing vacations and salary during these tough times.

I would have expected Mike to be depressed, angry, maybe even suicidal. But he surprised me with his attitude. He is resigned to what he has to do next, and is maybe even a little excited as he anticipates the next chapter of his professional life. The bankruptcy is forcing a major change in his life which he probably wouldn't have been able to do on his own. He talks about spending more time with his family, and getting a nine-to-five job so he can be home evenings.

"So Mike, how is your family taking all this," I asked, remembering his two boys, ages 7 and 4.
"They'll have a good Christmas," he said. "My family will see to that."
As for his wife, I know that she has never been much of a risk taker. He didn't speak much of her. Hopefully they will come through this intact.

Todays lesson: A person can find or lose themselves in times of adversity. Planning beyond the adversity can keep us focused on what is important.

No comments: